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B Communications Reports Financial Results For The First Quarter of 2013

B Communications Reports Financial Results For The First Quarter of 2013

 

–          Net income attributable to shareholders for the first quarter of 2013 totaled NIS 45 million ($12 million) – 

 

 

Ramat Gan, Israel – May 13, 2013 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the first quarter ended March 31, 2013.

Bezeq’s Results: For the first quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($ 659 million) and operating profit of NIS 761 million ($ 209 million). Bezeq’s EBITDA for the first quarter totaled NIS 1.1 billion ($ 299 million), representing an EBITDA margin of 45%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 497 million ($ 136 million). Bezeq’s cash flow from operating activities totaled NIS 972 million ($ 266 million) during the first quarter of 2013.

Cash Position: As of March 31, 2013, B Communications’ unconsolidated cash and cash equivalents (including dividend receivable) totaled NIS 1 billion ($ 276 million), its unconsolidated total debt was NIS 4 billion ($ 1.1 billion), and its net debt totaled NIS 3 billion ($ 831 million).

B Communications’ Unconsolidated Balance Sheet Data*

 

In millions    Convenience     
    translation into     
    U.S. dollars     
    (Note A)     
  March 31, March 31, March 31, December 31,
  2013  2013  2012  2012
  NIS US$ NIS NIS  
Short term liabilities 583 160 565 587  
Long term liabilities 3,455 947 3,934 3,511  
Total liabilities 4,038 1,107 4,499 4,098  
Cash and cash equivalents 585 161 393 694  
Dividend receivable 421 115 489  
Total net debt 3,032 831 3,617 3,404  
           
             

 

* Does not include the balance sheet of Bezeq.

Dividend from Bezeq: On May 13, 2013, B Communications is expected to receive two dividend payments from Bezeq which together total NIS 421 million ($ 115 million). These dividend payments include a current dividend of NIS 266 million ($ 73 million), representing B Communications’ share of Bezeq’s net profit for the second half of 2012, and a special dividend of NIS 155 million ($ 42 million), representing B Communications’ share of the fifth installment of six special dividend payments declared by Bezeq and approved by its shareholders in 2011.


 

B Communications’ First Quarter Financial Results

 

B Communications’ consolidated revenues for the first quarter of 2013 were NIS 2.4 billion
($ 659 million), a 12% decrease compared with NIS 2.7 billion reported in the first quarter of 2012. For both the current and the prior-year periods, B Communications’ consolidated revenues consisted entirely of Bezeq’s revenues.

During the first quarter of 2013, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 186 million ($ 51 million) in its consolidated financial statements. From April 14, 2010, the date of the acquisition of its interest in Bezeq, until March 31, 2013, B Communications has amortized approximately 53% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, B Communications finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to its audited financial reports, as well as to future financial statements.

B Communications’ financial expenses, net: B Communications’ unconsolidated net financial expenses for the first quarter of 2013 totaled NIS 48 million ($ 13 million). These expenses consisted primarily of NIS 45 million ($ 12 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 13 million ($ 4 million) related to its publicly traded debentures. These expenses were offset in part by financial income of NIS 7 million
($ 2 million) generated by short term investments.

Our unconsolidated net financial expenses in the first quarter of 2013 decreased by 17.2% compared with the first quarter of 2012. The decrease is primarily attributable to lower interest and CPI linkage expenses due to the reduction in the amount of the outstanding bank loans that we initially incurred to purchase our controlling interest in Bezeq.

 

B Communications’ net income attributable to shareholders for the first quarter of 2013 totaled NIS 45 million ($ 12 million), compared to NIS 16 million reported in the first quarter of 2012.  

 

B Communications’ Unconsolidated Financial Results

 

In millions   Convenience    
    translation into    
    U.S. dollars    
    (Note A)    
  Three-month Three-month Three-month  
  period ended period ended period ended Year ended
  March 31, March 31, March 31, December 31,
  2013 2013 2012 2012
  NIS US$ NIS NIS
Revenues
Financing expenses, net (48) (13) (58) (239)
Other and income tax expenses (1) (2) (48)
PPA amortization, net (58) (16) (93) (234)
Interest in Bezeq’s net income 152  41  169  567
Net income 45 12 16 46

 


 

Comments of Management

 

Commenting on the results, Doron Turgeman, CEO of B Communications’ said, “The first quarter was another stable period for Bezeq, demonstrating the cash flow-generating power of its formidable position in Israel’s telecommunications market. Due to Bezeq’s continued uninterrupted payment of both regular and special dividends, we have succeeded in building our cash reserves to their current strong level. We are extremely proud of the net income that we reported this quarter. We are currently examining a number of available alternatives to restructure our outstanding loans as a key to improving our financial position and operating metrics.”

 

Bezeq Group Results (Consolidated) 

To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the first quarter ended March 31, 2013. For a full discussion of Bezeq’s results for the first quarter of 2013, please refer to its website: http://ir.bezeq.co.il [1].

 

 

Revenues of the Bezeq Group in the first quarter of 2013 amounted to NIS 2.41 billion ($ 659 million) compared with NIS 2.74 billion in the corresponding quarter of 2012, a decrease of 12.2%. The reduction in the Bezeq Group revenues was primarily due to a decrease in revenues from the cellular segment, specifically due to a reduction in revenues from handset sales (decrease of NIS 160 million) together with a decrease in revenues from cellular services (decrease of NIS 120 million). In addition, revenues from the fixed-line segment decreased NIS 70 million.

Operating profit of the Bezeq Group in the first quarter of 2013 amounted to NIS 761 million ($ 209 million) compared with NIS 850 million in the corresponding quarter of 2012, a decrease of 10.5%. Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in the first quarter of 2013 amounted to NIS 1.09 billion ($ 299 million) (EBITDA margin of 45.3%) compared with NIS 1.21 billion (EBITDA margin of 44.1%) in the corresponding quarter of 2012, a decrease of 9.9%. Net profit attributable to Bezeq shareholders amounted to NIS 497 million ($ 136 million) compared with NIS 582 million in the corresponding quarter of 2012, a decrease of 14.6%. The decline in profitability metrics was primarily due to a decrease in profitability in the cellular segment as a result of increased competition in the sector.

Cash flow from operating activities of the Bezeq Group in the first quarter of 2013 amounted to NIS 972 million ($ 266 million) compared with NIS 998 million in the corresponding quarter of 2012, a decrease of 2.6%. Free cash flow of the Bezeq Group in the first quarter of 2013 amounted to NIS 726 million ($ 199 million) compared with NIS 585 million in the corresponding quarter of 2012, an increase of 24.1%. The increase in free cash flow was due the completion of major infrastructure projects initiated in prior years, specifically the NGN and submarine cable.

Net financial debt of the Bezeq Group was NIS 7.30 billion ($ 2.0 billion) at March 31, 2013 compared with NIS 6.65 billion as at March 31, 2012.

Notes:

 

  1. A.      Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of March 31, 2013 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of March 31, 2013 (NIS 3.648 = U.S. Dollar 1.00). The U.S. dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. dollars or convertible into U.S. dollars, unless otherwise indicated.

 

  1. B.       Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

 

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

 

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).
 
EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.
 
Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Company's consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.
 

About B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM For more information please visit the following Internet sites:

www.bcommunications.co.il [2]

www.ir.bezeq.co.il [3]

www.eurocom.co.il [4]

www.igld.com [5]

 

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com [6] / Tel: +972-3-924-0000

 

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

 

 

 


 

B Communications Ltd.

Condensed Consolidated Statements of Financial Position as at

(In millions)

      Convenience    
      translation into    
      U.S. dollars    
      (Note A)    
    March 31 March 31 March 31 December 31
    2013 2013 2012 2012
    NIS US$ NIS NIS

 

Assets          
Cash and cash equivalents    641  176  1,509  757
Investments, including derivative financial          
 instruments    2,029  556  1,654  1,484
Trade receivables, net    2,875  788  3,130  2,927
Other receivables    408  111  358  330
Inventory    148  41  225  123
Assets classified as held-for-sale    251  69  160 164
           
Total current assets    6,352  1,741  7,036 5,785
           
Investments, including derivative financial          
 instruments    93  25  101  90
Long-term trade and other receivables   950  261  1,442  1,074
Property, plant and equipment    6,676  1,830  7,076  6,911
Intangible assets    7,037  1,929  7,824  7,252
Deferred and other expenses    391  107  410  384
Investment in equity-accounted investee          
 (mainly loans)    1,024  281  1,041 1,005
Deferred tax assets    62  17  *191 *128
           
Total non-current assets    16,233  4,450  *18,085 16,844
           
Total assets    22,585  6,191  25,121 22,629

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

B Communications Ltd.

 

Condensed Consolidated Statements of Financial Position as at (cont’d)

 

(In millions)

 

 

 

 

Convenience

 

 

 

 

 

translation into

 

 

 

 

 

U.S. dollars

 

 

 

 

 

(Note A)

 

 

 

 

March 31

March 31

March 31

December 31

 

 

2013

2013

2012

2012

 

 

NIS

US$

NIS

NIS

 

Liabilities

 

 

 

 

 

Short-term bank credit, current maturities

 

 

 

 

 

 of long-term liabilities and debentures

 

 1,476

 405

 1,095

 1,582

Trade payables

 

 652

 179

 896

 792

Other payables, including derivative

 

 

 

 

 

 financial instruments

 

 863

 236

 1,038

 734

Dividend payable

 

 677

 186

 677

 669

Current tax liabilities

 

 626

 172

 570

 588

Provisions

 

 126

 34

 181

 145

Employee benefits

 

 230

 63

 *351

* 251

Total current liabilities

 

 4,650

 1,275

 4,808

4,761

 

 

 

 

 

 

Debentures

 

 4,876

 1,337

 5,376

 5,018

Bank loans

 

 6,416

 1,759

 6,835

 6,422

Loans from institutions and others

 

 538

 147

 541

 540

Dividend payable

 

 –  

 –  

 645

 –  

Employee benefits

 

 259

 71

 *247

 *260

Other liabilities

 

 80

 22

 77

 67

Provisions

 

 67

 18

 69

 66

Deferred tax liabilities

 

 1,092

 299

 1,319

 1,159

Total non-current liabilities

 

 13,328

 3,653

  15,109

13,532

 

 

 

 

 

 

Total liabilities

 

 17,978

 4,928

 19,917

18,293

 

 

 

 

 

 

Equity

 

 

 

 

 

Total equity attributable to equity holders

 

 

 

 

 

 of the Company

 

 1,005

 276

 *953

*960

Non-controlling interests

 

 3,602

 987

 *4,251

*3,376

 

 

 

 

 

 

Total equity

 

 4,607

 1,263

 5,204

4,336

 

 

 

 

 

 

Total liabilities and equity

 

 22,585

 6,191

 25,121

22,629

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 


 

B Communications Ltd.

 

Condensed Consolidated Statements of Income for the

 

(In millions, except per share data)

 

 

 

 

Convenience

 

 

 

 

 

translation into

 

 

 

 

 

U.S. dollars

 

 

 

 

 

(Note A)

 

 

 

 

Three-month

Three-month

Three-month

 

 

 

period ended

period ended

period ended

Year ended

 

 

March 31

March 31

March 31

December 31

 

 

2013

2013

2012

2012

 

 

NIS

US$

NIS

NIS

 

Revenues

 

2,405

659

2,740

10,278

 

 

 

 

 

 

Cost and expenses

 

 

 

 

 

Depreciation and amortization

 

563

154

755

 2,367

Salaries

 

500

137

512

 *1,978

General and operating expenses

 

889

244

1,082

 3,995

Other operating expenses (income), net

 

(41)

(11)

 (11)

 

 

 

 

 

 

 

 

1,911

524

2,349

8,329

 

 

 

 

 

 

Operating income

 

494

135

391

1,949

 

 

 

 

 

 

Financing expenses, net

 

64

17

10

*355

 

 

 

 

 

 

Income after financing

 

 

 

 

 

 expenses, net

 

430

118

381

1,594

 

 

 

 

 

 

Share of losses in

 

 

 

 

 

 equity-accounted investee

 

40

11

58

245

 

 

 

 

 

 

Income before income tax

 

390

107

323

1,349

 

 

 

 

 

 

Income tax

 

136

37

131

*556

 

 

 

 

 

 

Net income for the period

 

254

70

192

793

 

 

 

 

 

 

 

 

 

 

 

 

Income attributable to:

 

 

 

 

 

Owners of the company

 

45

12

16

*46

Non-controlling interests

 

209

28

176

*747

 

 

 

 

 

 

Net income for the period

 

254

70

192

793

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic income per share

 

1.50

0.41

0.55

1.52

Diluted income per share

 

1.50

0.41

0.54

1.49

 

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

 

 

 

 

B Communications Ltd.

 

Reconciliation for NON-IFRS Measures

 

EBITDA

 

The following is a reconciliation of the Bezeq Group operating income to EBITDA:

 

In millions

 

 

 

Convenience

 

 

 

 

translation into

 

 

 

 

U.S. dollars

 

 

 

 

(Note A)

 

 

 

Three-month

Three-month

Three-month

 

 

period ended

period ended

period ended

Year ended

 

March 31

March 31

March 31

December 31

 

2013

2013

2012

2012

 

NIS

US$

NIS

NIS

 

 

 

 

 

Operating income

761

209

850

*3,041

Depreciation and amortization

328

90

358

1,436

 

 

 

 

 

EBITDA

1,089

299

1,208

4,471

 

 

 

 

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

 

Free Cash Flow

 

The following table shows the calculation of the Bezeq Group free cash flow:

 

In millions

 

 

 

Convenience

 

 

 

 

translation into

 

 

 

 

U.S. dollars

 

 

 

 

(Note A)

 

 

 

Three-month

Three-month

Three-month

 

 

period ended

period ended

period ended

Year ended

 

March 31

March 31

March 31

December 31

 

2013

2013

2012

2012

 

NIS

US$

NIS

NIS

 

 

 

 

 

Cash flow from operating activities

972

266

998

4,014

Purchase of property, plant and equipment

(245)

(67)

(385)

(1,271)

Investment in intangible assets and deferred expenses

(44)

(12)

(75)

(269)

Proceeds from the sale of property, plant and equipment

43

12

47

305

 

 

 

 

 

Free cash flow

726

199

585

2,779